points 
Eric gave an excellent answer and there isn’t much more I could add to help you.
The only thing people get wrong sometimes is not using current/new credit. If you shut all access to credit down your score will not improve. Keep that in mind if applicable.
I wrote about this a few years ago. Take a look. Hope it helps.
Thanks,
Senior Loan Officer
Monarch Mortgage
600 Jefferson Plaza, Suite 400
Rockville, MD 20852
240-403-1970 Direct
301-412-0259 Cell
http://www.monarchmtg.com/bmendelson
http://www.brentmendelson.com
nmlsr#111407
Answer #1
It sound like you need to clear up these medical debt items before you are going to have much luck getting the loan you are looking for. I understand the credit union only got as far as reviewing your credit before they informed you they wouldn’t be able to assist you. Unfortunately, credit is the first hurdle that must be jumped before a lender will be able to get you the loan you are interested in. Credit scores in the low 500 range do not meet the underwriting guidelines that lenders must follow regardless of how strong the rest of your application is. With knowledge of the medical issues pulling down your credit score, you should reach out to each creditor and payoff the accounts. Obtain a letter of satisfaction and retain this as proof you did pay the accounts in full. Have them also acknowledge in writing that they have reported the payoff to the credit bureaus and the accounts should be removed from your reports. If they follow through with this notification to the 3 credit bureaus, your scores and the likelihood of being able to refinance should improve.